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Wednesday, September 15, 2010

Wall Street's New Super Stars


Well, if you haven't seen it, CNBC has a nice story called "the superstars of high frequency trading".  That's it, let's make heroes out of the people destroying our markets. Take a look at the intraday chart (a one minute chart really shows the tracks) and you can see the handiwork of the HFT "superstars" as they jack the markets around, up and down, hitting stop losses in both directions, and front running every big order coming in. Push a button, and a stock nobody has heard of runs up 12% in minutes. Push another button, and down goes another stock, wiping out every stop loss order standing. Gee. let's have a parade.

Here we have the Elder impulse system chart, which has been green ever since the follow through day early this month. It may be about to give it's first blue signal, but it takes at least 2 consecutive blue bars to be a halfway reliable trend change indicator. We now seem to be ready to test the upside here, as we approach 1130. Ultimately. I calculate a target here at 1155.



The Nasdaq 100 Has broken out past the August high, and now has the June high to contend with. This has gone nearly straight jup since the follow through day, and really isn't showing much sign of weakening.


The Russell 2000 was the first out of the gate to give a green buy signal, a couple of days before the other indexes, but since then has weakened and is the only index to give us the blue bar signal, which in this case, so far, has not resulted in a trend change, but as weak as this lookes, I would be surprised if it doesn't.


Crude oil is getting so rangebound it's hard not to make money trading it. 70 is the low level, 80 the high, 75 the pivot, buy somewhere around 71, trail a stop above 75, it's worked like a charm for months now, which means it might not work much longer, now that it has become so obvious.


The TNX has given 3 red signals on this move up, which probably means it is a weak move (a bounce) and we may be headed down again. It's hard to believe this can go a whole lot lower, but with an election year in bizarro land, I guess we should prepare for anything.

Let me take a wild guess here and propose that the low volume we have been seeing for so long is due to the HFT traders, who, since the flash crash, have shown that they move the market when they want, as far as they want, and don't get in their way or you will get crushed. And you want us to invest in that? No thanks.

I will have the new highs update shortly.

2 comments:

Paul said...

D,


Love your segment on the Wall Street Superstars. In the past when I have used stops, inevitably they seem to mysteriously get triggered. (MM's seem to know where the highest percentage of stops are and push the buttons to meet those targets.) Love your chart analysis. Seems as if we are just bleeding upward right now.

David said...

Hi Paul,

I used to see somebody go after stops in thinly traded small caps every once in a while, but now it happens in some more heavily traded big caps, which means that the HFT boys can move just about any stock they want, and they are gettiing quite blatant about it because they have apparently come to the conclusion that nobody is going to do anything about it.

Thanks for the comment.

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